Venture capital firm Pantera offers 40% discount on TON tokens locked up for a year, investors begin to worry amid Telegram case

Telegram founder Pavel Durov recently found himself embroiled in a legal dispute, causing ripples in the cryptocurrency venture capital space. This turmoil has particularly impacted a large number of investment firms involved in Toncoin TON, a digital token closely associated with the popular messaging application. Major investors such as Pantera Capital, Animoca Brands, and Mirana Ventures are now facing challenges as Durov faces serious legal allegations, casting a shadow over their investments.

Risk Capital Bets on TON, Telegram Scandal Leads to TVL Avalanche

Pantera Capital and Animoca Brands, top venture capital firms, have invested heavily in TON, a token based on blockchain technology designed for Telegram's ecosystem. TON was once seen as a potential disruptor, aiming to transform Telegram into a "super app" similar to China's WeChat, offering users a seamless experience from instant payments to blockchain games.

Earlier this year, Pantera Capital invested over $100 million in Toncoin TON, betting on its future potential. Fueled by the hype around Telegram's transformation, the price of TON surged fourfold from February to early July, with the total value locked (TVL) on the blockchain peaking at over $700 million.

Telegram Founder Arrested, Casting Doubt on TON's Future

However, the dream of seamless integration of digital assets on Telegram faced a setback. On August 24th, Durov was detained on the outskirts of Paris, facing charges including facilitating the spread of child sexual abuse images and drug trading on Telegram. This highlighted the inherent risks associated with projects tied to investments and a single influential figure.

Why was Telegram founder and TON visionary Pavel Durov arrested? Not about freedom but about crime and cryptocurrency.

Following the news, TON's token price dropped by 20%, and its TVL on the blockchain fell to $350 million, a 53% decrease in a month:

Telegram, Key to TON's Development, Faces Test

"Most investors assume that the app itself would obviously promote or at least seed the adoption of the TON network," said Lasse Clausen, founding partner of crypto venture capital firm 1kx. "Now we are faced with a situation where the company and its founder are hit by a black swan event, which might raise questions about the future."

Venture Capitalists Reassess Telegram's Future

As Telegram's reputation comes under scrutiny, venture capitalists are reevaluating their positions. Many investors have agreements with Telegram that restrict them from selling their TON holdings for at least a year, putting them in a dilemma when assessing the potential impact of Durov's legal issues. Telegram's lax regulatory measures once attracted many crypto enthusiasts but have now become the focus of legal issues.

Pantera Capital described TON as its largest investment but did not disclose specific figures, while other major investors like Animoca Brands and Mirana Ventures remain silent. Meanwhile, some supporters see the current situation as an opportunity. Crypto market maker DWF Labs claimed to have invested millions in purchasing TON after the price drop.

Crypto-Specific "Token Trading": Easier for VCs to Exit

According to Bloomberg, investments like TON are often referred to as "token trades," where venture capitalists receive tokens instead of traditional equity. This structure, unique to the crypto space, allows tokens to unlock after a year, enabling investors to gradually sell and exit quickly. However, this also exposes investors to significant volatility risks, as evidenced by the recent price fluctuations of TON.

"Token trades" often come with significant discounts; for instance, Pantera Capital reportedly purchased TON at a 40% discount to the market price. Despite the recent downturn of TON, based on the average price at the time of the transaction announcement, Pantera's investment remains profitable.

High Risk, High Reward

While token investments offer faster returns, they also come with higher risks. The volatility of digital assets means any downturn is immediately reflected in the portfolio report, unlike traditional equity investments that take years to show true value. This risk was dramatically demonstrated in 2022 when TerraUSD collapsed, causing the token Luna that supported the stablecoin to become worthless, leading investors like Three Arrows Capital to bankruptcy.

The case of TON serves as a reminder that crypto investments are full of unpredictability. As Durov's legal issues become clearer, venture capitalists will need to navigate the complexities of their investments and the changing regulatory environment for digital assets. Whether Telegram can regain its reputation and continue on the path to becoming a digital super app remains to be seen.